renewable energy

9 May 2011

Ownership (and Money) a Cure for NIMBY

by John Farrell | Date: 9 May 2011 | posted in: Energy, Energy Self Reliant States | 0

Last month, a Grist writer noted sarcastically that “Money is a miracle cure for ‘wind turbine syndrome’.” It is. And environmental advocates frustrated by the (spurious?) health and aesthetic complaints raised by not-in-my-backyard (NIMBY) actors would do well to consider why.

The implication of the Grist post (and this attitude in general) is that we can’t green our energy system without sacrifice. Getting to big carbon reductions will require enormous new renewable energy development and it will often happen in places where land was previously undeveloped (note: see this counter-argument). The folks who live there, the NIMBYs, need to do their share.

It’s awfully easy to offer sacrifice when you’re not on the altar. And it’s worth considering what’s really behind the “syndrome.”

In a recent study by the ever-methodical Europeans, they found that opponents to new wind and solar power have two key desires: “people want to avoid environmental and personal harm” and they also want to “share in the economic benefits of their local renewable energy resources.” It’s not that people are made physically ill by new renewable energy projects. Rather, they are sick and tired of seeing the economic benefits of their local wind and sun leaving their community.

Such opposition is perfectly rational, since investments in renewable energy can be quite lucrative (private developers and their equity partners routinely seek 10% return on investment or higher). And the economic benefits of local ownership far outweigh the economic colonialism of absentee owners profiting from local renewable energy resources.

Of course, NIMBY-ism only sometimes manifests itself as an economic argument, and there’s a good reason for that, too. In the project development process, there are precious few opportunities for public comment, and almost all of them represent up-or-down votes on project progress. None offer an opportunity to change the structure of the development to allow for greater local buy-in or economic returns. And no project will be halted simply because it isn’t locally owned. Projects can and have been stopped on the basis of health and environmental impacts. Enter Wind Turbine Syndrome.

There are alternatives. In Germany, Ontario, Vermont, and Gainesville, Florida, local citizens can use a renewable energy policy – a feed-in tariff – that offers them a guaranteed long-term contract if they become a renewable energy producer. This contract guarantees a reasonable, if small, return on investment and helps them secure financing. In Germany, the program’s simplicity means that half of their 43,000 megawatts (MW) of renewable energy are owned by regular farmers or citizens.

In Ontario, the provinicial clean energy program specifically requires project developers to use local content, guaranteeing a higher economic benefit for the province in exchange for its robust support for renewable energy. The program is forecast to generate 43,000 local jobs in support of 5,000 MW of new, renewable energy.

In the United Kingdom, public officials are piloting a “community wind fund” program for all new wind projects. Under the program, each wind project must pay in £1000 per megawatt (~$1600 per MW) per year, for 25 years, into a community fund where the project is located.

The impact for the community is significant. Compared to the typical land leases (often $5,000 per turbine for the host landowner), the community fund payments would increase local revenue by over 60 percent, with the additional funds spread to the entire community rather than just the lucky turbine hosts.

The impact on turbine owner net revenue is small but not negligible, reducing the net present value of the project by about 3 percent.

It’s not that any of these policies represent the silver bullet for local opposition to new renewable energy projects, but they do address the underlying problem.

The truth is that many people are frightened of being left behind by the clean energy revolution or angry that their local resources are tapped without commensurate local benefit. They find that there’s no way to be heard in the (democratic?) process without resorting to tangental arguments about health and viewsheds.

NIMBY has been misunderstood by the clean energy community. It is not a knee jerk, it’s a market failure.

When citizens see a new wind or solar energy project, it shouldn’t be from the sidelines. They should see it from the front seat, where they have hitched their wagon to environmental and economic progress by investing in a local energy project.

Our energy policy should make that possible. It doesn’t.

Federal tax policy makes it very difficult to share renewable energy tax incentives among multiple investors. Federal and state tax-based incentives preclude many local organizations (nonprofits, cities, schools) from owning wind turbines or solar panels. And utility billing rules make it nearly impossible (in most states) to share the electricity output from a shared project that isn’t utility owned.

There are brilliant examples of entrepreneurs overcoming these barriers to install community-based projects. Developer Dan Juhl and others have a record of success with community wind in Minnesota. The Clean Energy Collective is piloting a new community solar program in Colorado.

There are even some policy ideas bringing hope. Virtual net metering laws in eight states allow for sharing electricity output. Colorado’s solar gardens bill enshrines a small amount of community solar.

But the theme is one of triumph over adversity, with local ownership the exception rather than the norm. And without better energy policies that give locals a chance to buy in, the wind turbine syndrome epidemic will likely continue.

3 May 2011

State Energy Self-Reliance Potential

by John Farrell | Date: 3 May 2011 | posted in: Energy, Energy Self Reliant States | 0

The following map was the headline graphic to our 2009 report, Energy Self-Reliant States, the report that inspired this blog. I re-created the map for web viewing, so it’s now even easier to share how each state can meet its electricity consumption with in-state renewable energy resources.

The renewable resources considered include on- and off-shore wind, rooftop solar PV, hydro, combined heat and power, and high-temperature geothermal. Read the Energy Self-Reliant States report for more details.

Click the image for a larger version or here for an interactive one.

28 Apr 2011

Nevada Senate approves feed-in tariff

by John Farrell | Date: 28 Apr 2011 | posted in: Energy, Energy Self Reliant States | 0

By a vote of 13 to 8, the Nevada Senate earlier this week approved a feed-in tariff to boost renewable energy develoment in the state. The bill, SB184, now heads to the House where it is expected to pass. Unfortunately, a gubernatorial veto is also expected, so supporters are hoping for a 2/3 majority in favor.

18 Apr 2011

Colorado Town Considers “How Much Renewable Energy is Feasible” – 80% by 2025?

by John Farrell | Date: 18 Apr 2011 | posted in: Energy, Energy Self Reliant States | 0

A great story of a city looking to – literally – take ownership of its energy future:

The Colorado Renewable Energy Standard, as amended last year by the state Legislature, requires Xcel Energy to get 30 percent of its electricity from renewable sources by 2020.

…Boulder leaders — who let the city’s 20-year franchise agreement with Xcel Energy lapse at the end of 2010 — are now considering whether they can get an energy mix for their residents with a larger percentage of renewable energy than what Xcel is offering.

…At the “Clean Energy Slam” event in February, which gave participants two minutes to pitch a vision for Boulder’s energy future, a representative of Southwest Generation told the crowd that he believed his company could provide Boulder with an energy mix of 50 percent renewables and 50 percent natural gas by 2014. And by 2025, the company could provide up to 80 percent renewable energy to the city, the representative, David Rhodes, said.

…Jonathan Koehn, the city’s regional sustainability coordinator, said adding more renewables is only part of the equation.

“We’ve heard a lot of concern that, perhaps, more clean energy is driving this analysis,” he said. “But this is about long-term economic stability. When we talk about what our portfolio might look like in the future, we don’t have a predetermined notion of a certain percentage of renewables. What we want is to be able to analyze how we can have long-term stable rates.”

It’s not just about clean energy and stable rates, however. The decision to eschew a utility franchise was also about localization, described on a city website as “taking more control in determining:

Where the energy supply comes from – Locally produced

What types of energy are provided – Renewables over fossil fuels

How much we pay for it – Rate control

Local generation of renewable energy will add more to Boulder’s economy than importing clean electrons, and if those projects can also be locally owned (perhaps via a community solar project like the Clean Energy Collective is doing in Carbondale, CO) then the economic benefits multiply significantly.

Photo credit: Flickr user respres (photo is of Denver, not Boulder, but I wanted a sunrise…)

15 Apr 2011

Michigan Utility Freezes its Hot Solar PV Program

by John Farrell | Date: 15 Apr 2011 | posted in: Energy, Energy Self Reliant States | 0

Consumers Energy in Michigan, with a peak demand of around 4,000 megawatts (MW) just put the brakes on its pilot 2 MW solar PV program. The program sold out very fast, but rather than expand the program to accommodate demand, the utility says it needs to study the program.

The program was modeled on CLEAN Contracts, also known as feed-in tariffs, that provided a fixed payment per kilowatt-hour over 12 years that was high enough for residential and commercial solar PV systems to earn a decent rate of return. Similar programs operate on a larger scale in Gainesville, FL, Vermont, Ontario, and in many European countries.

A lot of local businesses were strongly interested in participating, in part for the spillover economic benefits:

“When I looked at all the businesses that benefited,” [said Mr. Draper, regarding Fluid Process Company’s] installation, “the local steel fabricator for the mounting poles, the tree remover, the ditch digging, crane, and concrete companies—Consumers would be giving the state a much-needed boost.”

For now, many solar industry and advocacy groups are trying to convince Consumers Energy to reinstate the program, especially since the utility is also trying to roll back its renewable energy surcharge from $2.50 to 70 cents per customer.

Said David Wright, of the non-profit Ecology Center, in Ann Arbor,

“We just don’t want to see the program end. It’s in everyone’s best interest to diversify power supplies, find out about cost reductions, improve the program, and support our local solar industry.”

14 Apr 2011

Smaller Generation Incites Largest Renewable Energy Gains

by John Farrell | Date: 14 Apr 2011 | posted in: Energy, Energy Self Reliant States | 2

While seeming counterintuitive, a focus on smaller-scale distributed generation enables more and faster development of cost-effective renewable energy.

Last week I wrote about the illusion that we can “move forward on all fronts” in renewable energy development; rather, a bias toward centralized electricity generation in U.S. policy reduces the potential and resources for distributed generation.

**Solar Economies of Scale Level Off at 10 Kilowatts**

In contrast, distributed generation provides unique value to the grid and society, and its development can also smooth the path for more centralized renewable energy generation.

First, distributed generation is cost-effective. Economies of scale for the two fastest-growing renewable energy technologies (wind and solar) level off well within the definition of distributed generation (under 80 megawatts and connected to the distribution grid). Solar PV economies of scale are mostly captured at 10 kilowatts, as shown in this chart of tens of thousands of solar PV projects in California. Wind projects in the U.S. are most economical at 5-20 megawatts, illustrated in a chart taken from the 2009 Wind Technologies Market Report.

Besides providing economical power relative to large-scale renewable energy projects, distributed renewable energy generation also has unique value to the electric grid. Distributed solar PV provides an average of 22 cents per kWh of value in addition to the electricity produced because of various benefits to the grid and society. The adjacent chart illustrates with data coming from this analysis of the New York electric grid. Grid benefits include peak load shaving, reduce transmission losses, and deferred infrastructure upgrades as well as providing a hedge against volatile fossil fuel prices. Social benefits include prevented blackouts, reduced pollution, and job creation.

Distributed wind and solar also largely eliminate the largest issue of renewable power generation – variability. Variability of solar power is significantly reduced by dispersing solar power plants. Variability of wind is similarly reduced when wind farms are dispersed over larger geographic areas.

Not only are integration costs reduced, but periods of zero to low production are virtually eliminated by dispersing wind and solar projects over a wide area.

As mentioned at the start, distributed generation also scales rapidly to meet aggressive renewable energy targets. Despite the conventional wisdom that getting big numbers requires big project sizes, the countries with the largest renewable energy capacities have achieved by building distributed generation, not centralized generation. Germany, for example, has over 16,000 megawatts of solar PV, over 80 percent installed on rooftops. Its wind power has also scaled up in small blocks, with over half of Germany’s 27,000 megawatts built in 20 megawatt or smaller wind projects. In Denmark, wind provides 15-20 percent of the country’s electricity, and 80 percent of wind projects are owned by local cooperatives.

With all these benefits, distributed generation can also smooth the way for centralized renewable energy, in spite of energy policies that favor centralized power. When distributed generation reduces grid stress and transmission losses by provided power and voltage response near load, it can defer upgrades to existing infrastructure and open up capacity on existing transmission lines for new centralized renewable energy projects. A focus on distributed generation means more opportunity for all types of renewable energy development.

It may seem counterintuitive, but distributed renewable energy should be the priority for reaching clean energy goals in the United States.

12 Apr 2011

Distributed Solar Power Worth Far More Than Electrons

by John Farrell | Date: 12 Apr 2011 | posted in: Energy, Energy Self Reliant States | 3

From the ability to reduce peak demand on the transmission and distribution system, hedge against fuel price increases, or enhance grid and environmental security, solar power has a monetary value as much as ten times higher than its energy value. The cost of residential-scale distributed solar PV is around 23 cents per kilowatt-hour (kWh) in a … Read More

1 Apr 2011

Michigan Editorial: We Prefer to Generate Our Own Renewable Energy

by John Farrell | Date: 1 Apr 2011 | posted in: Energy, Energy Self Reliant States | 0

The large transmission authority serving the upper midwest – the Midwest Independent System Operator – has plans for new high-voltage transmission lines leading from windy states like the Dakotas to places like Michigan. The purpose is to bring renewable energy from big western wind farms to places East.

Some of these places – like Michigan – would rather do it themselves.

The initial list of projects in the MISO region has an estimated cost of $4.8 billion. But MISO has pointed to additional projects over the next several years that could total between $16 billion and $20 billion. Michigan’s share of $16 billion worth of projects would be about $640 million annually. And most of these funds would be sent out of the state.

…This would happen even though Michigan already has its own state law requiring that 10 percent of its power must be generated using alternative sources by 2015. And all of that renewable-source energy must be generated within Michigan — which means electricity consumers likely won’t be buying or using power generated in other states.

The article doesn’t even get into the meat of the issue: that renewable electricity imports may be marginally cheaper than wind and solar power in Michigan, but that the economic impact of locally developed projects doesn’t show up on electricity bills.

Michigan isn’t alone in their desire for self-reliance. Ten East Coast governors signed a letter to members of Congress to protest visions for a new nationwide network of transmission that would have them importing Midwest wind at the expense of domestically built renewable energy. And the Canadian province of Ontario developed a comprehensive clean energy program with a requirement that all renewable energy and a majority of the actual components of new renewable energy facilities come from inside Ontario.

It may seem counter-intuitive that citizens would prefer more expensive electricity, but when weighed against the economic opportunity of local ownership and development, perhaps it’s no surprise.

30 Mar 2011

Cash Incentives for Renewables Cost Half as Much as Tax Credits

by John Farrell | Date: 30 Mar 2011 | posted in: Energy, Energy Self Reliant States | 0

Using the tax code to support wind and solar power significantly increases their cost. I wrote about this problem last year because project developers were selling their federal tax credits to third parties at 50 to 70 cents on the dollar.

Along these lines, the Bipartisan Policy Center released a study [last week] showing that simply handing cash to clean energy developers is twice — yes, twice — as effective as supporting them through tax credits. [emphasis added]

The problem is that all but the largest renewable energy developers or buyers can’t capture the full value of the federal tax credits. So, prior to the economic collapse, a number of enterprising investment banks (and others) started buying up tax credits to reduce their tax bills.

This was great for big banks, but lousy for taxpayers and electric ratepayers. In fact, using tax credits instead of cash grants for wind and solar projects increased the cost per kilowatt-hour produced by 18 and 27 percent, respectively. (Wait, why not 50 percent? Because even though the tax credit is only half as good as cash, the cash payment only covers up to 30 percent of a wind or solar project’s costs. So cash in lieu of tax credits can only improve that portion of a project’s finances.)

Seen another way, if the $4 billion spent on renewable tax incentives in 2007 had been given as cash instead, it could have leveraged 3,400 MW of additional wind power and 52 MW of additional solar power. This would have increased incremental installed wind capacity in 2007 by 64%, and installed solar capacity by 25%.

The increased costs come from higher prices that utilities pay for wind and solar power (and pass on to consumers) as well as the the cost to taxpayers of passing half of the tax credit value to investment bank shareholders instead of wind and solar projects.

The problem isn’t solved, but has simply been postponed.

When the economy tanked, so did profits (and tax liability) for big banks. Wind and solar producers had no one to buy their tax credits and the entire industry was in danger of collapsing. The adjacent chart illustrates the idiocy of relying on the tax code for energy policy.

Congress stepped in with a temporary fix, allowing project developers to receive a cash grant in lieu of the tax credit. The temporary cash grant (currently extended through 2011) kept the wind and solar industry running during the recession and has saved taxpayers and ratepayers billions of dollars.

It’s also helped level the playing field, allowing for local ownership of wind and solar projects, rather than requiring complex tax equity partnerships. It’s meant more revenue from wind and solar staying in the local community. And this means a larger, stronger constituency for renewable energy.

The cash grant option will expire at the end of 2011, but hopefully the climate hawks and fiscal hawks in Congress will take note: we can support wind and solar at half the price with smarter policy.

Hat tip to David Roberts at Grist for the study link.

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